The Judgment of the Court was delivered by

Tarun Kumar Basu, J.:— In these two writ applications the petitioner, Messrs. Grindlays Bank Ltd. challenged certain notices issued under s. 148 of the I.T Act, 1961 (hereinafter referred to as “the Act”). In Civil Rule No. 15774(w) of 1975, the petitioner has challenged notices under s. 148 of the Act in respect of the assessment years 1958–59, 1966–67, 1967–68, 1968–69, 1969–70 and 1970–71.

2. In Civil Rule No. 8747(w) of 1976, the petitioner has challenged notices under s. 148 of the Act in respect of the assessment years 1959–60, 1960–61, 1961–62, 1962–63, 1963–64, 1964–65 and 1965–66.

3. As almost identical questions of fact and law arise in both these civil rules by consent of parties, the two rules were heard together and one set of arguments were advanced in both. Although the reasons recorded by the ITO justifying the reopening of the assessment for the above-mentioned years were not set out either in the affidavit-in-opposition filed on behalf of the revenue or in any of the annexures thereto, they were produced before me from the records at the time of the hearing. By consent of parties, copies of all the recorded reasons for the aforementioned years have been kept in the records of these cases.

4. In respect of the assessment years 1958–59 to 1966–67, one of the reasons recorded by the ITO for initiating the proceedings is common. The reason is that the contribution by the petitioner to the Grindlays Superannuation Fund has been claimed as an admissible expenditure and the same has been wrongly allowed from year to year in the computation of the total income of the petitioner.

5. Mr. B.L Pal, learned advocate appearing on behalf of the revenue, submitted that for all the aforementioned years, namely, 1958–59 to 1966–67, there were two non-disclosures by the assessee in respect of the above years. First, the assessee did not disclose that the contribution to the Grindlays Superannuation Fund was debited to the Indian profit and loss account of the petitioner. Secondly, no evidence was produced at the time of the original assessment that the said Grindlays Superannuation Fund was a recognised one.

6. These two alleged non-disclosures by the assessee in respect of the above years may now be examined in some detail.

7. Dr. Debi Prosad Pal appearing on behalf of the petitioner drew my attention to the fact that in respect of at least two assessment years, namely, 1958–59 and 1966–67, in respect of which the reasons recorded by one H.P Roy, an ITO, on the 5th March, 1975, does not mention that the assessee did not disclose that the expenditure debited to the Indian profit and loss account included contribution to Grindlays Superannuation Fund.

8. On the other hand, the recorded reasons for the year 1958–59, inter alia, state that “such contributions were being made regularly in earlier years and had been claimed and debited to the Indian profit and loss account”. Dr. Pal, for the assessee, tries to explain the discrepancy between the recorded reasons for the years 1958–59 and 1966–67 and those for the assessment years 1959–60 to 1965–66 which were recorded by the same officer on the 24th February, 1976, with regard to this item of nondisclosures. According to Dr. Pal this can be explained only by the events which happened between the earlier recorded reasons for the above two years on 5th March, 1975, and the latter recorded reasons for 1959–60 to 1965–66 which were made on 24th February, 1976, being taken into account. It is pointed out that the petitioner moved the writ application against the notices for the assessment years 1958–59 and 1966–67 to 1970–71 on the 27th August, 1975. In the petition, the petitioner categorically stated in para. 12(b) and paras. 12(d) and (f) that at the time of the original assessment for the relevant assessment years the petitioner had produced all the relevant facts relating to the contribution to the Grindlays Superannuation Fund and also relied upon a letter dated 19th November, 1956, which was produced before the ITO at the time of the original assessment for the year 1958–59. I shall have occasion to refer to this letter in somewhat greater detail in the subsequent portion of this judgment.

9. According to Dr. Pal, after the petition was served on the respondents the subsequent recorded reasons on 24th February, 1976, as aforesaid were made out and in the subsequent recorded reasons, Mr. H.P Roy made the new allegations as to the non-disclosures of this expenditure debited to the Indian P & L A/c with regard to the Grindlays Superannuation Fund. In the premises, it was submitted that the alleged nondisclosure or alleged omission does not feature in the recorded reasons for the years 1958–59 and 1966–67 and, therefore, is beyond the scope of consideration, at least for these two years.

10. In so far as the other assessment years are concerned, Dr. Pal contended that the allegation that the assessee did not disclose that the expenditure debited to the Indian P & L A/C included contribution to the Grindlays Superannuation Fund is not correct and is contrary to the materials on record. It was submitted, as has been stated in the petition, that at the time of the original assessment for the year 1958–59, the assessing ITO made enquiries regarding this contribution and the petitioner stated before the officer that excepting the letter dated 19th November, 1956, written by the manager of the Bombay branch of the then Grindlays Bank to the general manager of the Grindlays Bank in London, there is no other record available. This letter which is annexure “Z” to the first petition contains the following paragraph: “It will be observed from the assessment that the superannuation fund contribution amounting to Rs. 1,44,076.60 in the year 1952 has been treated as an allowable expense.” It is pointed out by Dr. Pal that the allegation with regard to the production of the letter mentioned above in the petition have not been denied in the affidavit-in-opposition filed on behalf of the revenue. In fact Mr. B.L Pal, learned advocate for the revenue, in the course of his submissions, admitted that the said letter was produced at the time of the assessment for the assessment year 1958–59.

11. Similarly, for the assessment years 1959–60 to 1965–66, although it is stated in the recorded reasons that at the time of the original assessment the assessee did not disclose that the expenditure debited to the profit and loss account included contribution to the Grindlays Superannuation Fund, the said allegation in the recorded reasons is completely contrary to the materials on record as also in the averments made in the affidavit-in-opposi-tion in the two rules.

12. With reference to the petition it is pointed out that the petitioner made substantially the same averments as in respect of the assessment years 1958–59 and 1966–67 which has been mentioned hereinabove. Reference is made to the same letter which is annexure “Z” to the first petition.

13. Great emphasis is laid by Dr. Pal on the fact that it has been specifically and categorically stated in the petition that the contribution to the Grindlays Superannuation Fund was pointedly brought to the notice of the ITO who passed the original orders of assessment at the relevant time and the officer concerned having been satisfied allowed the said expenses as admissible. At the time of the hearing, a list was handed up to me of the various officers who had made the original assessment for the assessment years relating to which the impugned notices have been issued. It is submitted by Dr. Pal that no explanation has been given in either of the two affidavits in these two Rules as to why the ITO who had made the original assessment in question did not or could not file any affidavit regarding this fact. It was submitted that these facts could only be within the special knowledge of these ITOs who dealt with the assessment proceedings in the relevant years and nobody else. It was further pointed out that in para. 19 of the first affidavit-in-opposition and para. 29 of the second affidavit-in-opposition one Mr. H.P Roy who affirmed the affidavits, simply states that there was nothing on record to show that the materials alleged by the petitioner had been placed before the concerned ITOs or that they had any occasion to apply their minds thereto.

14. The argument goes on to say that this averment in the affidavits-in-opposition is worse than useless and should be completely ignored. This is because as pointed out by Dr. Pal it is hardly likely that any discussion which took place between the petitioner's authorised representatives and the assessing ITOs could find place in the records in the possession of the department. In the absence of any affidavit from the ITOs who made the original assessments, there could be no effective denial of the averments made in the petition. Mr. H.P Roy who had affirmed the affidavits did not make any of the original assessments.

15. Strong reliance is placed by Dr. Pal on my own decision in the case of Dunlop Rubber Company Ltd. (London) v. ITO, [1971] 79 ITR 349 (Cal). At-pages 358 and 359 of the report, I observed as follows:

“On the basis of the above pleadings, Dr. Pal invites me to hold that there is no effective denial of the allegations made by the petitioner with regard to the consideration of this item in the original assessment proceedings. He draws my attention to the fact that it is not the case of the income-tax department that the original assessing officers did not know the primary fact with regard to the receipt of this income by the petitioner-company or that it could not be discoveied by the original assessing officers. As I have said there is no affidavit by any of the original assessing officers. In para. 5 of the affidavit of Basu, it is denied that the admissibility of these amounts were considered by the ITOs. It is not said that the officers did not know this fact.

16. In my view, there is lot of substance in this contention. As I have said in some of my judgments this type of affidavit is practically useless. The person who has affirmed this affidavit has no knowledge of what transpired in the course of the original assessment proceedings in the relevant years of assessment. I have, therefore, to proceed on the footing that the same ITO was dealing with both the cases of the Indian company and the petitioner-company in the respective years. It is on record that Messrs. Ford, Rhodes & Parks & Co. were representing both the petitioner-company and the Indian company in the course of the assessment proceedings. After all, this is a case of a non-resident who is acting through its agents, a reputable firm of chartered accountants in Calcutta. I have the solemn testimony on oath by Mr. Vaidyanathan, an officer of the firm, that this question was gone into by the ITOs at the time of the original assessments.”

17. It is pointed out that my judgment in the above case was fully affirmed by the court of appeal presided over by S.P Mitra C.J and Sabyasachi Mukharji J. in Appeal No. 13 of 1971, in which the judgment was delivered on the 15th March, 1973.

18. Strong reliance was placed also on another decision of mine in the case of Shiv Lal v. ITO, [1970] 77 ITR 999 (Cal). In that case, at pages 1002 to 1003, I quoted with approval an extract from a judgment of Sinha J. (as he then was) in the case of Narsinghdas Bagree v. ITO, [1966] 61 ITR 172 (Cal) which were as follpws (pp. 1002, 1003):

“The Income-tax Officer who issued the notice under s. 34(1)(a) was Mr. M.S Mann. He, however, has not filed any affidavit. Another Income-tax Officer files an affidavit. Naturally, his knowledge is confined to the record. He has made vague statements in his affidavit and the original records have not been produced. I think that, on the facts, the petitioner's case is almost uncontradicted. Statements made, which are based on information received from the records which are not produced are worse than useless.”

19. In the present case also, I cannot but help coming to the same conclusion, namely, that in spite of specific allegations made by the petitioner that the relevant and material facts were before the original assessing officer, there has been no denial which merits a serious consideration by this court. The only two ITOs who could have thrown any light on this question of non-disclosure by the petitioner are the original assessing officer, Sri A.K Jana, and the officer who issued the impugned notice, namely, Shri D.K Gupta. None of them has come forward to pledge their oath before me.”

20. Although Dr. Pal was not unmindful of the fact that, in the case cited immediately above, neither the assessing officer nor the officer who issued the notice had filed any affidavit and in the case before Sinha J. (as he then was) the records were not produced, in spite of these factual differences Dr, Pal submitted that the principle of effective denial remains the same and should be adopted in this case. Reference was also made to an unreported judgment of Sabyasachi Mukharji J. in the case of Minoti Haider v. ITO in C.R No. 1097(W) of 1973 (since reported in [1978] 115 ITR 471 (Cal)) in which the judgment was delivered on the 8th September, 1975. Another unreported judgment of S.C Deb J. in Metal Distributors Ltd. v. ITO (Matter No. 455 of 1973) (since reported in [1978] 115 ITR 608 (Cal)) delivered on 5th December, 1975, was referred to. I find that, in both the unreported judgments (since reported), the view which I took in the two reported cases mentioned above has been substantially followed by their Lordships who delivered the two unreported judgments (since reported).

21. Relying on this proposition, Dr. Pal invites me to hold that on the state of facts as they are I should have no hesitation in coming to the conclusion that the allegation of the petitioner in the petition that there was no omission or failure on the part of the assessee to place all primary facts before the ITOs who made the original assessments goes virtually uncontradicted.

22. Mr. Ajit Sengupta, learned advocate for the revenue, who followed Mr. Pal at one stage of the hearing submitted that although the principle of effective denial by the revenue in respect of the allegations of the assessee have been clearly enunciated in the cases mentioned above, having regard to the importance of the present case, I should not decide it on that ground alone without going into the merits. Alternatively, Mr. Sengupta submitted that if I wanted to decide the present case on that ground alone, he could ask for leave to file affidavits by the original assessing ITOs. Having regard to the facts that these rules are pending since 1975 and 1976, I was not inclined to grant that leave.

23. After giving my anxious consideration to this aspect of the case, I am of the view that it would not be proper to decide the case on the basis of the affidavits alone, without dealing with the merits. I, therefore, proceed to deal with the case on its merits.

24. Coming to the merits of the respective contentions of the parties, Dr. Pal submitted that two affidavits-in-opposition suffer from confusion of thought on the question of the Grindlays Superannuation Fund. It was pointed out that in the “unrecognised superannuation fund”, which is mentioned in paras. 19(a) and (b), also in para 18(g) of the first affidavit-in-opposition has been wrongly equated and identified with the Grindlays Superannuation Fund. It was pointed out that the Grindlays Superannuation Fund was kept only in respect of the expatriate employees of the erstwhile Grindlays Bank working in India. The “unrecognised superannuation fund” was only in respect of the employees in the London office which was maintained in the London office and was debited to the London charges. The said London charges were never taken into account in the computation of the head office general charges, a proportion of which was allocated to the Indian business on the basis of the formula accepted since 1948. Reference was also made by Dr. Pal to several letters between the income-tax department and the petitioner whereby this point was clarified and specific mention was made to the Grindlays Superannuation Fund. It was further submitted, with reference to those letters, that contribution to this fund could not and in fact did not ever appear in the expenses of the head office but appeared as a debit in the Indian profit and loss account of the petitioner at all relevant times.

25. Dealing with the next contention of the revenue that the petitioner did not produce any evidence to show that the contribution to the Grindlays Superannuation Fund was a recognised one, Dr. Pal submitted that the said allegation of the revenue cannot constitute a material on which the ITO could have reason to believe that the income of the petitioner has escaped assessment in consequence of any omission or failure to disclose the material facts. As long as it was within the knowledge of the assessing officer that the petitioner had claimed this contribution as a deductible expenditure, it was for the ITO to arrive at a conclusion or inference as to whether such expenditure has been laid out wholly and exclusively for the purpose of the business and is to be allowed under s. 10(2)(xv) of the Indian I.T Act, 1922, which corresponds to s. 37 of the new Act. It was submitted that the conclusion as to the admissibility of this contribution as an allowable expenditure was a mixed question of law and fact which was for the ITO to arrive at after application of correct legal principles to the facts and circumstances of the case.

26. Reference was made in this connection to a decision of the Supreme Court in the case of CIT v. A. Tellery and Sons Pvt. Ltd., [1967] 63 ITR 288. In that case, it was held that it was for the assessing authority to determine what is the meaning to be given to the statutory phrase “expenditure laid out or expended wholly and exclusively for the purpose of such business”. The proper construction of statutory language is always a matter of law and, therefore, the claim of the assessee in any particular case that he is entitled to a deduction of certain items of expenditure under s. 10(2)(xv) of the 1922 Act involves the application of the law to the facts found in the setting of the particular case.

27. Dr. Pal pointed out that it was for the ITO to make necessary and intelligent enquiries, and it was not for the assessee to tell the ITO as to what inference, whether of fact or of law, he should deduce. Reference was made in this connection to the well-known decision of the Supreme Court in the case of Calcutta Discount Co. v. ITO, [1961] 41 ITR 191 and also to a decision of mine in the case of Hongkong and Shanghai Banking Corporation v. ITO, [1975] 100 ITR 531 (Cal).

28. It was pointed out that my decision mentioned above has been affirmed by the court of appeal in Appeal No. 244 of 1973 in which the judgment of the Bench was delivered by A.N Sen J. on the 10th March, 1977 (ITO v. Hongkong and Shanghai Banking Corporation, since reported in [1978] 115 ITR 582 (Cal) [DB]).

29. The revenue wanted to appeal to the Supreme Court from the aforesaid order of the court of appeal. The application for special leave under art. 136 was, however, dismissed by the Supreme Court consisting of Krishna Iyer and Untwalia J J. on 2nd December, 1977.

30. Adverting to the other aspect of this alleged omission, viz., the omission or failure to give evidence on the question that the aforesaid superannuation fund was a recognised one, Dr. Pal points out that whether the contribution to an unrecognised provident fund is to be allowed as a business expenditure is a matter essentially for the ITO to decide having regard to the relevant judicial decisions and provisions of the relevant I.T Acts.

31. Dr. Pal in this connection draws my attention to the decision of the Supreme Court in the case of Metal Box Company Of India Ltd. v. Workmen, [1969] 73 ITR 53. In this decision, the Supreme Court pointed out that the contribution towards an approved gratuity fund although not deductible under s. 36(v) of the I.T Act, 1961, was a permissible deduction from the gross receipts while preparing the profit and loss account and was, therefore, a permissible deduction in computing the commercial profit under s. 28 of the Act. It was pointed out that although the decision of the Supreme Court was given in connection with the determination of profit under the Payment of Bonus Act, 1965, the same principle should be applied to the instant case. Reliance was also placed on the cases of Madho Mahesh Sugar Mills (P.) Ltd. v. Commissioner Of Income-Tax., [1973] 92 ITR 503 (All), M/S. Delhi Flour Mills Co. Ltd.… v. Commissioner Of Income-Tax…, [1974] 95 ITR 151 (Delhi), India United Mills Ltd. v. CIT, [1975] 98 ITR 426 (Bom) and Tata Iron & Steel Co. Ltd. v. D.V Bapat, ITO, [1974] 96 ITR 1 (Bom).

32. Reliance was also placed on the decision of the Supreme Court in the case of CIT v. Mysore Spinning and Manufacturing Company Ltd., [1970] 78 ITR 4, where the court held that the contribution made by an employer to a provident fund which was not recognised under the I.T Act was to be allowed as a permissible deduction under s. 10(2)(xv) of the Indian I.T Act, 1922.

33. Having cited all these cases Dr. Pal fairly pointed out that I do not have to come to a decision as to whether this contribution to the superannuation fund which was not a recognised one was permissible or not. That is because this is essentially a question of legal inference to be drawn by the ITO by applying the correct legal tests. As long as the officer concerned knew that such a fund existed and the assessee was making a contribution thereto it was for the officer concerned to come to a conclusion as to whether such contributions were permissible as a deduction under the relevant I.T Act or not. It was pointed out that the statements made in the petition that at the time of the original assessments the ITO had made enquiries as to this fund was not effectively controverted by any competent officer by way of an affidavit. As such, it was submitted that there was no omission or failure on the part of the assessee on this score.

34. Reference was also made to the statements both in the recorded reasons as also in the affidavit on behalf of the revenue regarding the contention that the contribution to this fund was wrongly allowed. It is pointed out that this clearly postulates that the concerned ITO knew about it, but wrongly allowed the claim. If that is so, this is, at the highest, an error on the part of the officer concerned. In other words, this cannot be attributed to any omission or failure on the part of the assessee.

35. In this connection, my attention was drawn once again to the case of Calcutta Discount Company Ltd. v. ITO, [1961] 41 ITR 191 (SC), at page 206 of the report, where the Supreme Court negatived the plea that the memorandum and articles of association of the appellant-company were not disclosed at the time of the original assessments. The Supreme Court observed that it was unthinkable that the ITOs would not examine these documents. In the instant case, Dr. Pal contended that it is unthinkable that the concerned ITO did not make any enquiries with regard to these contributions to the superannuation fund.

36. On the strength of the above materials Dr. Pal confidently asserted that there had been no material disclosed in the recorded reasons which had any rational connection to the formation of the belief that the income for the relevant assessment years had escaped assessment on account of any omission or failure on the part of the assessee to disclose the primary and material facts. The said belief, therefore, is a mere pretence and cannot be held in good faith.

37. In my view, this contention of Dr. Pal is sound and should be accepted. For all the reasons given above and on the basis of materials disclosed, I am unhesitatingly of the view that there has been no omission or failure on the part of the assessee on the question of contributions to Grindlays Superannuation Fund by the petitioner. This contention of Dr. Pal, on behalf of the assessee, therefore, succeeds.

38. The next item of which the assessee is alleged to be guilty of omission to disclose the primary and material facts is with regard to head office expenses. It may be mentioned that this item of alleged omission is material in respect of the assessment years 1967–68 to 1970–71.

39. According to the revenue, the head office expenses in respect of the aforesaid years were claimed and allowed in the assessment of the petitioner as a result of incorrect inclusion of certain expenses in the computation of the head office expenses. In other words there was excessive allowance of head office expenses as claimed by the petitioner thereby resulting in under-assessment of the Indian income-tax in respect of the petitioner due to certain exaggerated and unallowable claims made by the petitioner in this connection.

40. It was pointed out by Dr. Pal that, at the time of the original assessments as alleged in the petition, this aspect was considered from all angles on the basis of all the available materials. There is no effective denial of this allegation in view of the fact that the original assessing ITO has not chosen to file any affidavit. Reference is made to many decisions set out above on this point and I am invited on this ground alone to conclude that the revenue's case ought to be dismissed.

41. With reference to the affidavit-in-opposition, particularly para. 18(g) thereof, Dr. Pal points out that the deponent-ITO was suffering from a confusion of thought. The deponent-officer in that paragraph was wrongly equating and identifying the unrecognised superannuation fund in respect of the head office employees in London with the Grindlays Superannuation Fund in respect of the expatriate employees of the former Grindlays Bank working in India. It was pointed out that the bank's contribution to the head office staff on account of provident fund, pension fund, superannuation fund, commutation fund, are not debited to the head office. General charges are allocated to the territories and are, therefore, beyond the ambit of Indian taxation. These are part of the London charges and there is no question of allocating them in respect of their overseas bank.

42. With reference to the affidavits and the correspondence Dr. Pal points out that the allegation that the contribution to the Grindlays Superannuation Fund was subsequently discovered to have been debited to the Indian profit and loss account although it was stated to have been debited to London charges is not only a false and incorrect statement but betrays a, complete confusion of thinking of the deponent-ITO. The ITO proceeds on the erroneous assumption as if it had been stated in the correspondence between the assessee and the ITOs that the contribution to the Grindlays Superannuation Fund had been debited to the London charges and then builds up his case that subsequently he had discovered that the said contribution to the Grindlays Superannuation Fund was debited to the Indian profit and loss account. It was submitted that the ITO has failed to appreciate the correct facts.

43. In my view, Dr. Pal's contention is sound and should be accepted. I am of the opinion, after going through the records and the correspondence, that the ITOs at the time of the original assessments were fully aware of the various items of claim as part of the head office expenses. If some item was wrongly allowed as a deduction, it was entirely due to an error on the part of the assessing officer and cannot be held to be due to any omission or failure on the part of the assessee. My attention is drawn in this connection to a judgment of the Supreme Court in the case of Gemini Leather Stores v. ITO, [1975] 100 ITR 174 as also my own decision in the case of Honkong and Shanghai Banking Corporation v. ITO, [1975] 100 ITR 531 at page 540 (Cal) (Single Bench). It was pointed out that my decision has been affirmed by the court of appeal in Appeal No. 244 of 1973 (ITO v. Hongkong and Shanghai Banking Corporation) in which the judgment was delivered on the 10th March, 1977 (since reported in [1978] 115 ITR 582 (Cal) [DB]). The special leave application to the Supreme Court was dismissed by the Supreme Court on 2nd December, 1977. On this aspect, it was pointed out by Dr. Pal that the head office in London was completely reorganised since August, 1970, and under the new set up there was an office of the chairman controlling four divisions, viz., overseas banking division, finance division, merchant banking division, and international division. It is pointed out that any alleged information with regard to the reorganisation and with regard to the head office expenses in connection with the assessment year 1971–72 cannot be called any material regarding head office expenses for the earlier assessment years, viz., 1967–68 to 1971–72. Therefore, for those years the ITO cannot be held to have reason to believe that any income has escaped assessment because of excessive head office expenses being allowed due to any omission or failure on the part of the petitioners. In this connection my attention was drawn to a decision of the Supreme Court in the case of ITO v. Lakhmani Mewal Das, [1976] 103 ITR 437, where the Supreme Court held that the reasons must relate to the relevant years of the assessment. In that case, the Supreme Court held that the reasons were farfetched, vague and remote and had no live link between the materials coming into the possession of the ITO and the formation of his belief. I was invited to hold that the same principles were applicable to the present case.

44. As I have already indicated, in my view, there is no omission or failure on the part of the assessee on this account.

45. Mr. B.L Pal for the revenue relied on a decision of this court in the case of Bachulal Kapur v. ITO reported in [1976] 2 CLJ 506 (sic). In that case, after a consideration of all the relevant materials, this court held that the contention of the revenue should succeed. Dr. Pal, in the course of his argument, and also in the written submissions that he had filed at the conclusion of the arguments, mentioned various reasons why the judgment was distinguishable. In the first place, he pointed out that it was a case of loan transaction and not a case of claiming an expenditure by way of deduction. He further argues that the case was not made out on behalf of the assessee that the information did not relate to the relevant assessment year as has been argued in the present case. He again contended that it is unthinkable that in the relevant years of assessment the ITO had not gone into this question and made intelligent enquiries. He again commented on the fact that the only competent persons, viz., the original assessing officers, have not filed any affidavit before me in this case.

46. I think this contention of Dr. Pal should be accepted. As I have already said it must be held that there was no omission or failure on the part of the assessee in disclosing all the primary and material facts relating to head office expenses.

47. This takes us to the last item of alleged omission which is in connection with allowing of depreciation on I.C.T Tabulators and Blue Star Accounting Machines which relates to the assessment years 1967–68 to 1970–71. The admitted position with regard to the machines is that, although they have been installed at the office of the petitioner-bank, due to the agitation on the part of the workmen and staff of the petitioner-bank based on what is called as the anti-mechanisation drive, these machines could not be worked during the relevant years due to labour trouble. At the time of the original assessment, the petitioner relied on a circular of the CBR dated 20th May, 1948, which provided that “the periods of labour trouble such as strikes, and lock-outs during which machinery, etc, had perforce remained idle, should not be excluded from the period for which the depreciation would be admissible”.

48. In the petition, the petitioner made a specific case that the original assessing ITO after looking into the circular allowed the depreciation on the machines. Hence, there was no question of any omission or failure on the part of the assessee on this account. According to the recorded reasons by Mr. H.P Roy, who was not the original assessing authority, it is stated that in the course of investigation for the assessment year 1971–72, information has come into his possession that these machines were not put to use during the assessment year 1967–68. According to him, the excessive depreciation claimed and allowed had resulted from non-disclosure of the material fact that the aforesaid machine had not been put to use during the relevant assessment year.

49. Dr. Pal in this connection contended that whether the non-user of the machines in the relevant years of assessment could negative the claim of the assessee for allowance of the depreciation in respect thereof was essentially an inference to be drawn from the relevant facts by applying correct legal tests. Dr. Pal strongly contended that the CBR had taken the view that this claim should be allowed. He pointed out that the expression “used for the purpose of business” in the relevant section does not mean only actual user but can also refer to machines which are capable of being used or are ready for use. He relied on several decisions of the English courts and our courts. In this connection reference was made to the English case of Blackdown Properties Ltd. v. Ministry of Housing and Local Govt., [1967] 1 Ch 115 at pages 119, 122 (Ch.D). Reference was also made to the case of CIT v. Viswnath Bhaskar Sathe, [1937] 5 ITR 621 (Bom) and the case of Niranjan Lal Ram Chandra v. CIT, [1963] 49 ITR 177 (All) at pages 182, 183.

50. It is not necessary for me to analyse the legal authorities cited above because I do not have to come to the conclusion whether the claim for depreciation is allowable or not. That is a matter which is for the revenue authorities to decide. Dr. Pal, in my opinion, rightly contended that so long as the fact of the claim on account of these machines was before the assessing authorities, the question whether they were legally allowable or not is an inference to be arrived at by the ITOs by applying the correct legal principles.

51. For the reasons given above, I hold that with regard to I.C.T tabulators and the accounting machines in so far as the claim for depreciation was concerned there was no omission or failure on the part of the petitioner to disclose fully and truly all material and primary facts in its possession. This ground cannot be invoked by the revenue for sustaining the impugned notice.

52. Dr. Pal also cbntended that the sanction granted by the CIT and the CBDT in connection with the impugned notices had to be made by the relevant authorities mentioned above by applying their minds to the reasons recorded by the ITO. It was contended that if the recorded reasons did not disclose any materials which had a rational connection with the formation of the belief of the ITO under s. 147(a) of the I.T Act, 1961, the sanction granted by the CIT and the CBDT would be vitiated by non-application of mind.

53. In view of my finding that the impugned notices were void on the grounds mentioned above, I refrain from pursuing this aspect of the matter any further.

54. The last group of notices under s. 148 of the Act for the assessment years 1969–70 and 1970–71 stand on a somewhat different footing. This is because, as Mr. B.L Pal contended, these notices could be supported under s. 147(b) of the Act as they had been issued prior to the expiry of four years from the relevant year of assessment. Mr. Pal in this connection relies upon the report of the Public Accounts Committee of Parliament, extracts from which are to be found at pages 37 and 38 of the first affidavit-in-opposition. It was argued that the report of PAC constitutes information which subsequently came into the possession of the officer and it justifies the reopening of the assessment for the above years.

55. Dr. Pal while meeting the above contention submitted that, in the recorded reasons, it is not even being suggested by the ITO that the alleged “information” which has come into his possession was not before the assessing ITO. It was again commented that the original assessing officers have not filed any affidavits in these proceedings and no explantion has been given as to why these officers could not file any affidavit. Reference was again made to my decision in the case of Dunlop Rubber Company Ltd. (London) v. ITO, [1971] 79 ITR 349 (Cal) and Shiv Lal v. ITO, [1970] 77 ITR 999 (Cal). Reference was also made to the unreported judgment of Sabyasachi Mukharji J. in the case of Smt. Minoti Haider v. ITO in C.R Case No. 1097 (w) of 1973 in which the judgment was delivered on 8th September, 1975 [since reported in [1978] 115 ITR 471 (Cal)] and of Deb J. in Metal Distributors Ltd. v. ITO (Matter No. 455 of 1973) in which the judgment was delivered on 5th December, 1975 [since reported in [1978] 115 ITR 608 (Cal)].

56. On the question of “information” within the meaning of s. 147(b) of the Act, Dr. Pal relied on a decision of the Supreme Court in the case of CIT v. Dinesh Chandra H. Shah, [1971] 82 ITR 367 and also the decision of the Supreme Court in the case of Bankipore Club Ltd. v. CIT, [1971] 82 ITR 831.

57. It was pointed out by Dr. Pal that the information alleged to have been received by the revenue is admittedly in connection with the assessment year 1971–72 for which the accounting period is 1970. It is the admitted position that the organisation of the head office had radically changed as a result of the reorganisation of the chairman's office in the year 1970. Therefore, the head office expenses in the year 1970 and the items included therein cannot be the same as those in the earlier years. Dr. Pal in this connection relies on a decision in the case of Ramkrishna Ramnath v. ITO, [1970] 77 ITR 995 (Bom) as an authority for the proposition that the “information” which may be obtained subsequent to the assessment must relate to the relevant years of assessment. According to Dr. Pal, there was nothing to show that the “information” alleged to have been collected by the ITO related to the year of assessment.

58. In my view, this contention of Dr. Pal is sound and should succeed. On the materials, I do not find anything to come to the conclusion that the “information”, assuming that it could be so within the meaning of s. 147(b) of the Act, related to the year of assessment.

59. Lastly, Dr. Pal submitted that the report of the Public Accounts Committee could not be an “information” because the Committee did not form any opinion as to the allegations of under-assessment but had merely indicated the allegations made by one R.P Gupta, who is the ex-employee of the petitioner-bank, and was dismissed by the bank on 13th November, 1971. It was pointed out that unlike in the case of R.K Malhotra v. Kasturbhai Lalbhai, [1977] 109 ITR 537 (SC), on which Mr. B.L Pal relied, there was no formation of opinion or view of the Public Accounts Committee. All that was stated was that there were allegations by Mr. Gupta and investigations were in progress. It was submitted that the notice under s. 147(a) or s. 147(b) could not be issued merely for investigation. (See the Supreme Court decision in the case of Chhugamal Rajpal v. S.P Chaliha, [1971] 79 ITR 603 and the case of Sheo Nath Singh v. AAC, [1971] 82 ITR 147).

60. With regard to the last case, it was pointed out that, according to the recorded reasons, the assessee was believed to have received a sum of Rs. 22,00,000 from “Oberois” and the same had escaped assessment. On these facts, it was held that the materials on which the ITO formed such belief had not been disclosed and the notice was quashed.

61. Lastly, Dr. Pal pointed out that, in the recorded reasons, there is no mention of the Public Accounts Committee Report and, consequently, it did not lie in the mouth either of Mr. H.P Roy who had filed the affidavit or of Mr. B.L Pal who argued the case before me that this report of the Public Accounts Committee constituted “information” justifying the reopening. As I have already indicated, according to Dr. Pal, the Public Accounts Committee did not form any opinion.

62. Even assuming that the PAC had formed any opinion which could be an “information” within the meaning of s. 147(b) of the Act, it was submitted that the opinion must be of a person, body, authority or authorities competent and authorised to form the opinion of pronouncing the law as was held in the case of R.K Malhotra v. Kasturbhai Lalbhai, [1977] 109 ITR 537 (SC). It was submitted that the Public Accounts Committee was not competent to form such an opinion.

63. In my view, the contention of Mr. Pal must be accepted. On the materials and on the submissions made, I find that even for the assessment years 1969–70 and 1970–71, there is no “information” within the meaning of s. 147(b) of the Act which could justify the reopening.

64. This disposes of all the contentions raised on behalf of the parties.

65. In the result, this application succeeds and the rule is made absolute. There will be a writ in the nature of mandamus calling upon the respondents to forthwith recall, cancel and withdraw the notice under s. 148 of the Act in respect of years 1958–59, 1959–60, 1960–61, 1961–62,1962-63, 1963–64, 1964–65, 1965–66, 1966–67, 1967–68, 1968–69, 1969–70 and 1970–71 which are the subject-matter of these two applications. There will also be a writ in the nature of mandamus directing the respondents to forbear from giving effect to any of the notices in respect of the aforesaid years. There will be no order as to costs.

66. Operation of this order is stayed for eight weeks from date. The injunctions dated 27th August, 1975, and 5th July, 1976, granted in C.R Nos. 15774(w)/75 and C.R 8747(w)/76, respectively, will also continue for the same period. Any further stay will have to be obtained from the court of appeal.